by Francesco Messeri, Giovanni Amici, Paolo Brandimarte, Patrizia Semeraro
Continue on SelfMadeQuant
Suggested foundations for optimisation and numerical methods and options and derivatives pricing. Specialist prerequisites vary by paper.
Read the linear algebra used to define a numerical problem.
Identify the objective, constraints and conditions for an optimum.
Build replication and risk-neutral probabilities in a tractable model.
Distinguish pricing probabilities from physical forecasts.
Understand identifiability and fitted model parameters.
Separate model error from unstable numerical computation.
Connect the pricing equation, closed-form value and implied volatility.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.